From April, domestic natural gas price would be $7-8 /mBtu: Oil secretary

The ministry had notified the new pricing formulae based on Rangarajan panel report last week

The new domestic natural gas pricing set to be applicable from April is likely to be in the range of $7-8 a million British thermal units (mBtu). Clarity would emerge by March 15, said a senior petroleum ministry official.

The ministry had last week notified a new pricing formula based on the Rangarajan panel report. “It would be a weighted average of international prices between January and December 2013. We would come out with the exact pricing by March 15. It may be in the range of $7-8 per mBtu,” Petroleum Secretary Vivek Rae told reporters on the sidelines of Petrotech 2014 here.

The Cabinet Committee on Economic Affairs had on June 27, 2013 cleared the new gas-pricing formula based on the recommendations by a panel headed by Prime Minister’s Economic Advisory Council Chairman C Rangarajan. This was expected to almost double the domestic natural gas prices from $4.2 mBtu to $8.4 an mBtu.

The Rangarajan formula takes the average of the US, Europe and Japanese hub prices and averages it out with the netback price of imported liquefied natural gas to give the sale price of domestically-produced gas. However, the new pricing would be revised on a quarterly basis, taking into account the average of global rates and LNG import price, with a lag of one quarter.

LPG cap
The petroleum ministry on Sunday expressed concerns over a demand to increase the per-household cap on subsidised LPG cylinders from nine to 12, saying it would impact the under-recovery figures. “When we increased the number of cylinders from six to nine, at least 90 per cent of our customers were covered. If it gets increased by three more, 97 per cent of the customers would be covered . However, this will tell upon the under-recovery figures. It has to be reimbursed by the finance ministry and public sector undertakings. A final call will be taken by the cabinet,” said Petroleum Minister Veerappa Moily.

 He added the move would have a cascading effect on inflation and fiscal deficit.

Congress Vice-President Rahul Gandhi had recently met Prime Minister Manmohan Singh demanding an increase in the cap on subsidised LPG cylinders.

The government had capped the supply of subsidised domestic LPG cylinders to six a household in September 2012 in an effort to cut the subsidy bill,. The limit was later increased to nine in January this year.